12. SEGMENT INFORMATION

As of June 30, 2017, the Company owns and manages properties within five segments: (1) Philadelphia Central Business District (CBD), (2) Pennsylvania Suburbs, (3) Metropolitan Washington, D.C., (4) Austin, Texas and (5) Other. The Philadelphia CBD segment includes properties located in the City of Philadelphia in Pennsylvania. The Pennsylvania Suburbs segment includes properties in Chester, Delaware, and Montgomery counties in the Philadelphia suburbs. The Metropolitan Washington, D.C. segment includes properties in the District of Columbia, Northern Virginia and southern Maryland. The Austin, Texas segment includes properties in the City of Austin, Texas. The Other segment includes properties located in Camden county in New Jersey and properties in New Castle county in Delaware. On February 2, 2017, the Company sold its last two remaining properties located in California, which were previously included in the Other segment. See Note 3, “Real Estate Investments,” for further information. In addition to the five segments, the corporate group is responsible for cash and investment management, development of certain real estate properties during the construction period, and certain other general support functions. Land held for development and construction in progress are transferred to operating properties by region upon completion of the associated construction or project.

The following tables provide selected asset information and results of operations of the Company's reportable segments (in thousands):

Real estate investments, at cost:
	June 30, 2017		December 31, 2016
Philadelphia CBD	$	1,536,488	$	1,320,974
Pennsylvania Suburbs		1,024,252		1,005,446
Metropolitan Washington, D.C.		974,152		975,987
Austin, Texas		146,859		146,794
Other		87,927		137,094
	$	3,769,678	$	3,586,295
Assets held for sale		-		73,591
Operating properties	$	3,769,678	$	3,659,886

Corporate
Construction-in-progress	$	119,690	$	297,462
Land held for development (a)	$	125,157	$	150,970

(a)	As of June 30, 2017, the Company categorized 50 acres of land held for development located in the Other segment as held for sale in accordance with applicable accounting standards for long lived assets. See Note 3, “Real Estate Investments,” for further information.

None of the above aforementioned sales or properties classified as held for sale are considered significant dispositions under the accounting guidance for discontinued operations.

Net operating income (in thousands):

	Three-month periods ended
	June 30,
	2017								2016
	Total revenue		Operating expenses (a)			Net operating income (loss)			Total revenue		Operating expenses (a)			Net operating income
Philadelphia CBD	$	54,451	$	(21,464	)	$	32,987		$	48,082	$	(19,775	)	$	28,307
Pennsylvania Suburbs		35,157		(11,240	)		23,917			35,102		(12,580	)		22,522
Metropolitan Washington, D.C.		22,749		(8,464	)		14,285			25,291		(8,768	)		16,523
Austin, Texas		8,763		(4,132	)		4,631			7,850		(2,911	)		4,939
Other		4,160		(2,580	)		1,580			9,062		(5,074	)		3,988
Corporate		2,511		(2,738	)		(227	)		1,794		(1,113	)		681
Operating properties	$	127,791	$	(50,618	)	$	77,173		$	127,181	$	(50,221	)	$	76,960

	Six-month periods ended
	June 30,
	2017							2016
	Total revenue		Operating expenses (a)			Net operating income		Total revenue		Operating expenses (a)			Net operating income
Philadelphia CBD	$	108,900	$	(42,301	)	$	66,599	$	97,752	$	(39,031	)	$	58,721
Pennsylvania Suburbs		70,812		(23,824	)		46,988		72,208		(25,735	)		46,473
Metropolitan Washington, D.C.		46,111		(17,847	)		28,264		52,630		(19,667	)		32,963
Austin, Texas		17,886		(7,705	)		10,181		16,397		(6,166	)		10,231
Other		10,522		(6,436	)		4,086		21,802		(12,676	)		9,126
Corporate		4,480		(3,586	)		894		2,894		(1,721	)		1,173
Operating properties	$	258,711	$	(101,699	)	$	157,012	$	263,683	$	(104,996	)	$	158,687

(a) Includes property operating expense, real estate taxes and third party management expense.

Unconsolidated real estate ventures (in thousands):
	Investment in real estate ventures, at equity				Equity in income (loss) of real estate ventures
	As of				Three-month periods ended June 30,						Six-month periods ended June 30,
	June 30, 2017		December 31, 2016		2017			2016			2017			2016
Philadelphia CBD	$	43,164	$	48,691	$	45		$	(475	)	$	(21	)	$	(20	)
Pennsylvania Suburbs		3,296		15,421		148			315			424			580
Metropolitan Washington, D.C.		143,088		141,786		(75	)		(332	)		392			(781	)
Austin, Texas		53,752		52,886		1,646			(459	)		1,281			(738	)
MAP Venture (a)		16,989		20,893		(787	)		(1,042	)		(1,904	)		(1,598	)
Other		1,818		1,654		107			327			164			488
Total	$	262,107	$	281,331	$	1,084		$	(1,666	)	$	336		$	(2,069	)

(a)

The MAP Venture represents a joint venture formed between the Company and MAP Ground Lease Holdings LLC, an affiliate of Och-Ziff Capital Management Group, LLC, on February 4, 2016. The MAP Venture’s business operations, including properties in Richmond, Virginia; Metropolitan Washington, D.C.; New Jersey/Delaware and Pennsylvania Suburbs, are centrally managed with the results reported to management of the Company on a consolidated basis. As a result, the investment in the MAP Venture is separately presented. All other unconsolidated real estate ventures are managed consistently with the Company’s regional segments.

Net operating income (“NOI”) is a non-GAAP financial measure defined as total revenue less property operating expenses, real estate taxes and third party management expenses. Property operating expenses that are included in determining NOI consist of costs that are necessary and allocable to our operating properties such as utilities, property-level salaries, repairs and maintenance, property insurance, management fees and bad debt expense. General and administrative expenses that are not reflected in NOI primarily consist of corporate-level salaries, amortization of share awards and professional fees that are incurred as part of corporate office management. All companies may not calculate NOI in the same manner. NOI is the measure that is used by the Company to evaluate the operating performance of its real estate assets by segment. The Company believes NOI provides useful information to investors regarding the financial condition and results of operations because it reflects only those income and expense items that are incurred at the property level. While NOI is a relevant and widely used measure of operating performance of real estate investment trusts, it does not represent cash flow from operations or net income as defined by GAAP and should not be considered as an alternative to those measures in evaluating our liquidity or operating performance. NOI does not reflect interest expenses, real estate impairment losses, depreciation and amortization costs, capital expenditures and leasing costs. The Company believes that net income (loss), as defined by GAAP, is the most appropriate earnings measure. The following is a reconciliation of consolidated net income (loss), as defined by GAAP, to consolidated NOI, (in thousands):

	Three-month periods ended June 30,						Six-month periods ended June 30,
	2017			2016			2017			2016

Net income (loss)	$	7,698		$	(1,323	)	$	28,969		$	44,987
Plus:
Interest expense		20,304			19,829			41,741			43,520
Interest expense - amortization of deferred financing costs		596			644			1,230			1,418
Interest expense - financing obligation		-			242			-			523
Depreciation and amortization		44,263			46,907			90,155			95,780
General and administrative expenses		6,320			6,076			15,745			15,196
Equity in (income) loss of Real Estate Ventures		(1,084	)		1,666			(336	)		2,069
Provision for impairment		327			5,679			3,057			13,069
Loss on early extinguishment of debt		-			-			-			66,590
Less:
Interest income		163			359			556			679
Net gain (loss) on disposition of real estate		1,088			(727	)		8,411			114,729
Net gain on Real Estate Venture transactions		-			3,128			14,582			9,057
Consolidated net operating income	$	77,173		$	76,960		$	157,012		$	158,687